The painful truth is that until the Big 3 can make money on EVs, the UAW is losing leverage. In addition to Mexico profiting from this strike, since it is making the Ford Mach-e and Chevrolet Equinox EVs, Tesla ( TSLA) is also a winner in the EV wars. The Wall Street Journal’s Editorial Board issued a scathing weekend opinion piece titled, “A UAW Strike Made in Washington,” subtitled: “The underlying cause of the auto walkout is the Biden Administration’s forced electric-vehicle transition.” Something has to give, so I suspect the Biden Administration just threw a big wrench into the UAW negotiations. It will be interesting to see how the Big 3 respond, since they are not making money on their EVs, which the Biden Administration is mandating they make.
Those record profits have not been shared fairly, in my view, with those workers.” Specifically, he said, “Auto companies have seen record profits, including in the last few years, because of the extraordinary skill and sacrifices of UAW workers. On Friday, President Biden called on the Big 3 to share more of their profits with the UAW. Everything is on the table.” But any long strike would mostly help Mexico. It will give our national negotiators maximum leverage and flexibility in bargaining. UAW President Fain said, “This strategy will keep the companies guessing. Meanwhile, the UAW is prepared to expand its strike locations, depending on how the bargaining progresses. In theory, a short strike – say two weeks or so – could help the Big 3 tighten their inventories and stop the excessive discounting of their massive inventories.Īt the end of August, Stellantis ( STLA) (Chrysler, Dodge and Jeep) had a 74-day inventory of vehicles, Ford ( F) had a 64-day supply and GM ( GM) had a 50-day supply. UAW President Shawn Fain repeated his mantra that “record profits mean record contracts.” The UAW has never gone on strike with all of the Big 3, so the real winner in this fight could be Mexico, which will now likely generate more vehicle production. The UAW lowered its demand for a 40% pay increase over the next few years to 36%, but that remains too high for the Big 3. The other big news last week was that the UAW agreed to strike last Friday, which could push the jobless rate above 4% for September. The UAW Strike May Reward Foreign Auto Makers the Most
Also, July’s strong retail sales gain was revised down to a 0.5% gain (from 0.7%).Īfter the retail sales report and inflation indicators came out, the Atlanta Fed lowered its third-quarter GDP estimate to a +4.9% annual pace, down from its previous estimate of a +5.6% annual pace. One other major report came out on Thursday, when the Commerce Department announced that Retail Sales rose 0.6% in August, which was much better than the economists’ consensus estimate of a 0.1% increase.Įxcluding gas station sales, however, retail sales rose only 0.2%, so retail sales were also warped by rising energy prices. The other good news was that wholesale service costs only rose 0.2% in August, down from 0.5% in July. Meanwhile, wholesale food prices declined 0.5%. Wholesale gasoline prices surged a whopping 20% in August, and overall wholesale energy prices rose by 10.5%. On Thursday, the Labor Department announced that the Producer Price Index (PPI) rose 0.7% in August, substantially higher than the analysts’ consensus estimate of 0.4%, but in the past 12 months, the PPI has risen just 1.6%, well below the Fed’s 2% target rate.Įxcluding food and energy, the core PPI rose 0.2% in August and 2.2% in the past 12 months. Since higher energy prices are the major reason the CPI rose in August, I do not expect the Fed to raise rates at its forthcoming Federal Open Market Committee (FOMC) next week. The good news is that owners’ equivalent rent rose only 0.3%, and 7.3% in the past 12 months, so it appears that shelter costs are finally moderating somewhat. Volatile food prices doubled August’s 0.3% overall gains at 0.6%, but energy prices surged 5.6% and gasoline prices rose by double digits, +10.5%.
On Wednesday, the Labor Department announced that the Consumer Price Index (CPI) rose 0.6% in August and 3.7% in the past 12 months, but the core CPI, excluding food and energy, only rose 0.3%. The two major inflation indicators released last week were a bit “hotter” than expected, but that was mostly due to energy price increases.
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